Appeal court affirms refusal to award damages for loss of profits from missed sublease payments
In a case arising from the default of a sub-tenancy agreement, the Ontario Court of Appeal has found that the motion judge provided no reasons not to enforce the agreement on post-judgment interest outlined in the head lease.
In Professional Court Reporters Inc. v. Pistachio Financier Corp., 2022 ONCA 669, Professional Court Reporters Inc. (PCR) and Pistachio Financier Corp. entered into a sub-tenancy agreement. Real Crowd Capital Inc. operating as R2 (RCCI) indemnified Pistachio’s obligations under the sublease.
Pistachio defaulted after failing to pay rent for seven days, leaving PCR with the option to terminate the sublease. PCR provided notice of termination and re-entered the premises. It then brought an action against Pistachio and RCCI asking for payment of the following:
- all amounts owed under the sublease
- damages arising from the default and termination of the sublease in the amount of $750,000
- pre- and post-judgment interest at the lesser of prime-plus-five percent per annum and the maximum rate that the applicable law allowed in line with the head lease’s terms.
Pistachio, RCCI, and its sub-subtenant 2291818 Ontario Inc. (BeWell) filed their own action. This action alleged that PCR unlawfully terminated the sublease and owed damages in connection with their lockout and relocation. It also claimed a set-off in PCR’s action.
PCR successfully moved for summary judgment and the Ontario Superior Court of Justice dismissed the action of Pistachio, RCCI, and BeWell. However, the motion judge refused to award damages based on PCR’s claim for loss of profits upon finding that it failed to meet its burden of proof.
The motion judge awarded PCR $91,952.58 in damages, $10,706.56 in pre-judgment interest at the contractual rate of prime-plus-five percent per annum, and post-judgment interest under s. 127 of Ontario’s Courts of Justice Act.
No profit component to sublease payments
Regarding the issue of damages for lost profits, PCR relied on the difference between the rent that it had to pay under the head lease and the amount that it was charging Pistachio under the sublease.
Parham Fini testified that there was no profit component to the sublease rent payments. The Ontario Court of Appeal ruled that the motion judge was entitled to accept Fini’s evidence that there was no loss of profits– though his evidence could have been clearer – and was entitled to conclude that PCR failed to prove that the disparity amounted to a loss of profits.
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Next, the appellate court found PCR was entitled to pre- and post-judgment interest at the head lease rate of prime-plus-five-percent per annum, given that the parties did not allege any exceptional circumstances. The motion judge gave no reasons for her decision not to give effect to the parties’ agreement regarding post-judgment interest, the court noted.
Lastly, the appellate court held that there should be no change to the date from which post-judgment interest should be calculated. Though PCR contended that interest should run from an earlier date, it failed to make this argument in its factum, the court said.